College Tuition Giveaways = Opportunity?

The democratization of higher education has been costly, but has created huge and profitable industries — from housing and textbooks to loans and 529s .

That old model has been shaken — Harvard University recently announced a new plan to provide full and partial tuition grants to many of its students (those whose families make up to $180,000 a year). Already, other schools (including Yale) have followed suit or made similar announcements. (BTW, is this a signal that they don’t value their own BA’s?)

Is this the opening of an age of innovation in the pricing of higher education? (think of Harvard’s new plan as the iPod of education). The Acton MBA (which has been mentioned recently on this blog) offers a fellowship model that is interesting. This blog also recently highlighted a company from which students lease textbooks rather than buy them.

Ideas/technologies/trends/entrepreneurs, typically start out on the edge. When it comes to education, Harvard and Yale are way out on the edge (outliers) on many fronts — from reputation to endowments to alumni networks and research impact.

Clearly more and more colleges, universities, community colleges, and other tuition based educational institutions will begin tweaking, expanding, mutating this action taken by Harvard. The opportunity is there — who is going to jump in? Its not just going to be the schools.

A side note — a potential unintended consequence of this price cutting and spending of endowments (where much of the new grant money is coming from) may be that endowment money managers (who are often amongst the best paid and most successful) begin to take bigger risks in investments to achieve greater returns to grow a base of principal that has been lessened. This could mean greater volatility in global financial markets (who do you think has been betting on subprime mortgages?) and also could mean more funding to new ventures and technologies in high growth technologies.